Explaining MNsure, post-PreferredOne

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Enrollees can stick with PreferredOne when it makes its exit from MNsure, but they won’t be eligible to receive any federal tax credits they qualified for when they were enrolled through the exchange.

One of the key components of any competitive marketplace is the ability for the players to have an easy exit.

That’s why Golden Valley-based PreferredOne’s decision last week to leave MNsure — the Minnesota’s health insurance exchange that’s part of the Affordable Care Act — wasn’t surprising to most experts. PreferredOne was one of the smallest plans on the health care exchange, and it offered the lowest prices in the market, helping Minnesota achieve some of the lowest average rates in the nation. When company officials realized they weren’t making enough money, though, they decided to bolt.

But it’s election season in Minnesota, and the news was predictably filtered through the lens of partisan politics, with Republicans taking the opportunity to remind everyone that it was a Democratic administration that helped implement MNsure and its ill-conceived rollout.

For the most part, experts say PreferredOne’s decision to leave is not the political or economic disaster some have painted it out to be. Even so, the carrier’s exit still has some near and long-term ramifications for consumers currently enrolled in the exchange and the insurers still participating.

Here’s what to expect, post-PreferredOne, as the state prepares for the next open enrollment period Nov. 15:

What will happen to the people enrolled in PreferredOne now?Well, the situation certainly isn’t convenient for those consumers. Anyone now enrolled in a PreferredOne plan will retain it through 2014, but they’ll likely have to enroll again in 2015 with one of the other four nonprofit plans currently providing coverage through MNsure. If they want, enrollees can stick with PreferredOne when it makes its exit from MNsure, but they won’t be eligible to receive any federal tax credits they qualified for when they were enrolled through the exchange. Also, any new plan they get through MNsure is likely to be more expensive or offer a smaller provider network.

How many people will this impact?A lot, but also fewer than you might have realized. Most of the 325,000 enrollees in MNsure are actually signed up for government-sponsored plans, not the private “qualified health plans” like those offered by PreferredOne. That said, of the 55,000 people who signed up for private plans through MNsure, about 24,000 were enrolled with PreferredOne as of July.

Do people with PreferredOne know they need to re-enroll?Probably not everyone. In order to get the word out to those enrolled with the plan, MNsure officials are planning a PR blitz before the next open enrollment period, which starts on Nov. 15. In early October, MNsure is also set to release the new rate plans. At that point, the state should have a lot more information about who was enrolled with PreferredOne, MNsure CEO Scott Leitz said. “We anticipate doing a very targeted outreach effort … to get them to re-enroll in MNsure,” Leitz told the exchange’s governing board in September.

“I think the concern right now is making sure the people who are enrolled know what their options are and that they can make a change and be ready for the new open enrollment period,” said Lynn Blewett, a professor at the University of Minnesota’s School of Public Health. “Everybody is trying to figure out who took the low cost plans and who they enrolled. The market is shaking out and people are understanding who is signing up. The existing plans will be marketing and trying to figure out who is out there.”

Is it possible people could stay with PreferredOne, but not through MNsure?It’s possible. Because PreferredOne’s rates were so low, the federal tax credits were either unavailable or small, so some people may just choose to move off the exchange and into PreferredOne’s private individual coverage.

What does this mean for the other plans in MNsure?Four other nonprofit carriers also offer private insurance through MNsure — Blue Cross and Blue Shield of Minnesota, UCare, Medica and HealthPartners — and none have given any indication that they plan to leave the exchange in 2015.

That said, experts say the rates could go up in those plans now that PreferredOne has left the exchange. The other plans “no longer have to think about PreferredOne’s low bid when they submit their own bids,” said Roger Feldman, a professor at the University of Minnesota’s School of Public Health.

That means Minnesota will probably not be the lowest in the nation for premiums anymore, but double digit increases also seem unlikely. And increases probably won’t come right away in 2015, Feldman added.

Department of Commerce Commissioner Mike Rothman is set to release the 2015 rates for the remaining plans early next week, and given the timing of PreferredOne’s decision, there’s little time to make changes (the department and other insurers involved in MNsure can’t say much now as the review process is technically underway).

Is there an upside to this?Yes, actually. Experts suggest that everyone who signed up through MNsure — not just those signed up with PreferredOne — take a second look when open enrollment begins in November. And not just because the technical issues that plagued the exchange in the beginning should be (for the most part) worked out by now. “The rates can change, provider networks can change; [people] should run the numbers again and make sure with the new rates and other changes these place are making, that they are still making the best choices for 2015,” said Allan Baumgarten, a Minnesota-based health care finance analyst. “Hopefully it will be a better shopping experience the second time around.”

Comments (9)

“It may be Minnesota’s state ObamaCare exchange, but it more closely resembles the Hotel California. You can check in, but forget about doing anything else with MNsure. The scandal-plagued portal doesn’t allow consumers to change brokers, change plans, or account for “life changes” such as employment activities, retirement, or disability during the enrollment year. And as tens of thousands of enrollees are about to discover, it doesn’t allow users to renew their coverage, either — because those systems haven’t been built yet”

In thinking about issues related to health care, it’s useful to understand and make a distinction between problems of health care generally, and those specifically related to Obamacare. Obamacare, after all, is a response to a set of problems it did not create. There have been complaints, for example, about rising Obamacare premiums. Well, premiums are going up because we are spending more on health care, and that would have happened even if Obamacare had not been enacted.

The above posting is an example of that failure to identify issues specific to Obamacare. First of all, the problems raised aren’t exchange related. The point of the exchange is to bring buyers and sellers together. MnSure has been problematic in that regard, but those are “technical issues” which can be resolved by tech types and they have little to do with the underlying policy issues of health care in America. After the first reference to technical issues, the writer above goes on to discuss policy considerations which have nothing to do with the website.

What is the nature of those policy issues? Well they mostly have to do with the nature of contracts, and contracts existed long before the creation of Obamacare. Can’t switch insurers in the middle of a contract? You couldn’t do that before the enactment of Obamacare. Your insurer decides to change or terminate your coverage? That happened before Obamacare was enacted too.

The irony here is that Obamacare is criticized for not having, or falling short in providing features, that it’s critics would oppose and not include in any substantive proposal of their own, a big reason why the Republican controlled House of Representatives, while voting 50 times to repeal Obamacare, has not voted even once to enact an alternative. Not once.

“I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.”
Source: Speech, “A Politics of Conscience,” June 23, 2007

Sold on a promise that was a lie.

The tech problems are merely symptoms of a greater problem. Yes, the Executive Director had health care experience, but it was in PR not in IT. MNSure is chiefly an IT project, not a PR project. Yes, they did spend millions on a weird ad campaign. Much was made of her vacation during the early days of the roll-out. What did we expect her to do, spin it positive; that is what PR people do, right?

Where did the $150 million go? It was spent on software and licensing fees for stuff that didn’t work. In the private sector, non-working software isn’t paid for. Validation and acceptance testing is performed to prove the product works before it goes live.

That remark, made in 2007, was a promise, not a lie. The program the president favored at that time would have been a more complete fulfillment of his promise made after his election, but was not politically possible.

Is it fair for opponents of the president to object that he didn’t keep his promises when they did everything the could to make it impossible for him to keep them?

I am sure the $150 million dollars went lots of places and maybe it was too much but business got something extremely valuable in return, something they were unwilling to invest in themselves, a marketplace where they could sell their products. Preferred One used this taxpayer funded subsidy to their business to acquire an industry leading market share. It’s not the taxpayers fault, they didn’t use this tool the taxpayer provided them at great expense more wisely.

That 2007 promise was bundled with the costly features of insuring 30 million uninsured people and bringing “government efficiency to healthcare. The “promise” was laughable then and it is downright sad now. What did the President favor that would have reduced costs?

In a 3,137 county analysis, the ACA Increased 2014 Individual-Market Premiums By Average Of 49%; in the average state by 41 percent in 2014, relative to 2013. One county in Missouri saw a 271% increase in premiums for men. This is the ACA, the Affordable Care Act; the first A in ACA is “affordable”.

That 2007 promise was bundled with the costly features of insuring 30 million uninsured people and bringing “government efficiency to healthcare.

Oh sure,but that really isn’t a matter of dispute between the parties. Uninsured people get health care too, it just isn’t paid for, or when it is paid for, it’s done in an extremely inefficient and costly matter. I do believe it’s the case that both parties agree that all Americans should have access to affordable health care, the disagreement just has to do with how that is to be done, with Republicans favoring a market based approach. Because we are insuring more, the costs of insurance will go up. But, hopefully at least, the cost of overall health care, what we spend as a nation. Maybe I should note here that Republicans argued that creation of a market based system would reduce premiums as health insurers competed with each other. Markets don’t actually work out that way, as is shown by what happened to PreferredOne. Personally, I don’t think the existence of markets as a rule lowers prices, because if it did the stock market would always go down. But folks on my side of the discussion accepted markets as a price of getting the deal done.

” What did the President favor that would have reduced costs?”

The president favored a single payer approach which could be used to pressure health care providers to reduce costs. In practical terms that just doesn’t work out well because health care providers have too much political clout to let that happen. And in political terms, that’s an argument we have sort of given up on because any effort to use government’s market power to reduce costs is decried as socialism, communism, the empaneling of death panels, the picking of losers and winners, that sort of thing.

It seems to me that future premium rates filed by insurers will increasingly reflect a built-in administrative cost of verifying individual tax credits or subsides, which vary for every person given their income situation. Over time the insurance companies will more precisely understand what that annual administrative cost is.

I purchased an individual Preferred One private plan without a government subsidy in early 2014 through an insurance broker. The broker said that if one doesn’t need a subsidy then one should not bother with the MnSure website and purchase directly from the company, which is what I did.

The problem going forward appears to be if the MnSure published rates are the standard by which individual plans are priced and measured against in the future, then that standard will increasingly reflect a built-in administrative cost which private individual plans do not bear. To me, this could be the Achilles Heel of the so-called competitive and open electronic marketplace promised by MnSure and other state exchanges. Competitive bidding will theoretically lower the overall insurance premiums of those needing subsidies but not the individuals not needing subsidies.

“The problem going forward appears to be if the MnSure published rates are the standard by which individual plans are priced and measured against in the future, then that standard will increasingly reflect a built-in administrative cost which private individual plans do not bear..”

I am not sure how significant a problem this is. For one thing there will be competitive pressure on providers to reduce prices which would otherwise reflect costs they don’t bear. And in this case, the costs should be minimal, involving a link between tax returns and MnSure.

It’s also the case that in theory at least, the existence of health care exchanges should lower overall premium costs. At least that’s one of the arguments offered for them by Republicans back in the old days when the GOP favored such exchanges. Even I think there will be some cost savings generated by Obamacare, although not in the same way originally envisioned by Republicans. Non subsidized purchasers of health care insurance should benefit from those cost savings.